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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI ABY T VARKEY & SHRI OM PRAKASH KANT
This appeal by the assessee is directed against order dated 15.11.2022 passed by the Ld. Commissioner of Income-tax – National Faceless Appeal Centre [in short ‘the Ld. CIT(A)’] for assessment year 2020-21 in relation to rectification order passed by the Assessing Officer u/s 154 of the Income-tax Act, 1961 (in short The Master Polishers 2 ‘the Act’). The grounds raised by the assessee are reproduced as ‘the Act’). The grounds raised by the assessee are reproduced as ‘the Act’). The grounds raised by the assessee are reproduced as under:
On facts and in law, the Learned Commissioner of Income Tax On facts and in law, the Learned Commissioner of Income Tax On facts and in law, the Learned Commissioner of Income Tax (hereinafter referred to as Ld. CIT (hereinafter referred to as Ld. CIT-A) had erred in confirming the A) had erred in confirming the addition of Rs. 13 addition of Rs. 13,41,333/- made w/s. 143(1) by CPC made w/s. 143(1) by CPC Bangalore.Under the facts and circumstances, he ought to have Bangalore.Under the facts and circumstances, he ought to have Bangalore.Under the facts and circumstances, he ought to have deleted the addition made by CPC Bangalore. deleted the addition made by CPC Bangalore.
On facts and in law, the Ld. CIT 2. On facts and in law, the Ld. CIT-A had failed to appreciate A had failed to appreciate that the sum of Rs. 13,41,333/ that the sum of Rs. 13,41,333/- was paid within due d was paid within due dates; hence the same is allowable u/s. 36(1)(va) r.w.s. 2(24)(x). hence the same is allowable u/s. 36(1)(va) r.w.s. 2(24)(x). hence the same is allowable u/s. 36(1)(va) r.w.s. 2(24)(x). 3. On facts and in law, the Ld. CIT 3. On facts and in law, the Ld. CIT-A had erred in not directing A had erred in not directing CPC to allow credit of Rs. 13,328/ CPC to allow credit of Rs. 13,328/- being the TDS on income being the TDS on income which have been offered to tax. Under the facts and which have been offered to tax. Under the facts and which have been offered to tax. Under the facts and circumstances circumstances of the matter he should have directed PC of the matter he should have directed PC Bangalore to allow the credit of TDS of Rs. 13,328/ Bangalore to allow the credit of TDS of Rs. 13,328/ Bangalore to allow the credit of TDS of Rs. 13,328/-. 2. In the ground No. 1 and 2 of the appeal, the assessee is In the ground No. 1 and 2 of the appeal, the assessee is In the ground No. 1 and 2 of the appeal, the assessee is aggrieved with the disallowance upheld by the Ld. CIT(A) in respect aggrieved with the disallowance upheld by the Ld. CIT(A) in respect aggrieved with the disallowance upheld by the Ld. CIT(A) in respect of employee’s contribution to ES s contribution to ESI/PF, which was made by the CPC I/PF, which was made by the CPC as an adjustment and further sustained in rectification order u/s adjustment and further sustained in rectification order u/s adjustment and further sustained in rectification order u/s 154 of the Act. The Ld. CIT(A) has upheld the disallowance in view 154 of the Act. The Ld. CIT(A) has upheld the disallowance in view 154 of the Act. The Ld. CIT(A) has upheld the disallowance in view of binding precedent of Hon’ble Supreme Court in the case of of binding precedent of Hon’ble Supreme Court in the case of of binding precedent of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. v Checkmate Services Pvt. Ltd. v. CIT in Civil Appeal No. 2833 of . CIT in Civil Appeal No. 2833 of 2016, observing as under : observing as under :
“4. Having pursued the rectification order, the grounds of appeal
4. Having pursued the rectification order, the grounds of appeal
4. Having pursued the rectification order, the grounds of appeal and the written submissions, the issue of admissibility of and the written submissions, the issue of admissibility of and the written submissions, the issue of admissibility of payment of employees' contribution of SIC/PF beyond the due payment of employees' contribution of SIC/PF beyond the due payment of employees' contribution of SIC/PF beyond the due date as per the relevant Statute, raised through ground number r the relevant Statute, raised through ground number r the relevant Statute, raised through ground number 1 is hot tenable in view of decision of the Hon'ble Supreme Court 1 is hot tenable in view of decision of the Hon'ble Supreme Court 1 is hot tenable in view of decision of the Hon'ble Supreme Court in the case of Checkmate Services pvt. Ltd. Vs CIT in Civil Appeal in the case of Checkmate Services pvt. Ltd. Vs CIT in Civil Appeal in the case of Checkmate Services pvt. Ltd. Vs CIT in Civil Appeal No. 2833 of 2016 with CA No. 2830/2016, CA No. 159/2019, No. 2833 of 2016 with CA No. 2830/2016, CA No. 159/2019, No. 2833 of 2016 with CA No. 2830/2016, CA No. 159/2019, CA No.2832/20 CA No.2832/2016 and CA No: 2831/2016 vide judgment dated 16 and CA No: 2831/2016 vide judgment dated 12.10.2022, wherein it was held that deduction us 36(1)(va) of 12.10.2022, wherein it was held that deduction us 36(1)(va) of 12.10.2022, wherein it was held that deduction us 36(1)(va) of The Master Polishers 3 ITA No. 252/M/2023 the IT Act is admissible only of the amount so received from the IT Act is admissible only of the amount so received from the IT Act is admissible only of the amount so received from employees for PF/ESIC is credited in specified account within employees for PF/ESIC is credited in specified account within employees for PF/ESIC is credited in specified account within the due date as per the re the due date as per the relevant Statute. In the instant appeal, it levant Statute. In the instant appeal, it is an admitted position of the appellant that there was delay in is an admitted position of the appellant that there was delay in is an admitted position of the appellant that there was delay in crediting the contribution so collected in the specified account crediting the contribution so collected in the specified account crediting the contribution so collected in the specified account within the due date as per the relevant Statute. within the due date as per the relevant Statute.”
3. Before us, the Ld. Counsel of t Before us, the Ld. Counsel of the assessee submitted that he assessee submitted that assessee was engaged in providing manpower securities services assessee was engaged in providing manpower securities services assessee was engaged in providing manpower securities services etc. He submitted that e submitted that salary/ remuneration payment payment to staff for the month was paid in subsequent month the month was paid in subsequent month, preferably before 7 , preferably before 7thday of next month. For example . For example, payment for month of April payment for month of April 2019 was paid on or before 7th th of May 2019. The Ld. Counsel referred to the 19. The Ld. Counsel referred to the provisions of section 36(1)(va) of the Act and submitted that provisions of section 36(1)(va) of the Act and submitted that provisions of section 36(1)(va) of the Act and submitted that employee’s contribution was deposited as per the due date s contribution was deposited as per the due date s contribution was deposited as per the due date prescribed under the relevant Ac prescribed under the relevant Act. The Ld. Counsel further referred he Ld. Counsel further referred to the employee provident fund scheme 1952 formulated under the to the employee provident fund scheme 1952 formulated under the to the employee provident fund scheme 1952 formulated under the provisions of the relevant Act. The relevant clause no. 38 of the provisions of the relevant Act. The relevant clause provisions of the relevant Act. The relevant clause scheme is reproduced as under: is reproduced as under:
“38. Mode of payment of contributions.
Mode of payment of contributions. - (1) The employer s (1) The employer shall, before paying the member his wages in respect of any period or before paying the member his wages in respect of any period or before paying the member his wages in respect of any period or part of period for which contributons are payable, deduct the part of period for which contributons are payable, deduct the part of period for which contributons are payable, deduct the employee's contribution from his wages which together with his employee's contribution from his wages which together with his employee's contribution from his wages which together with his own contribution as well as an administrative charge of such own contribution as well as an administrative charge of such own contribution as well as an administrative charge of such percentage of the pay (basic wages, dearness allowance, ercentage of the pay (basic wages, dearness allowance, ercentage of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions retaining allowance, if any, and cash value of food concessions retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees admissible thereon) for the time being payable to the employees admissible thereon) for the time being payable to the employees other than an excluded employee, and in respect of which other than an excluded employee, and in respect of which other than an excluded employee, and in respect of which provident fund c provident fund contributions are payable as the Central ontributions are payable as the Central Government may fix, he shall within fifteen days of the close of Government may fix, he shall within fifteen days of the close of Government may fix, he shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts every month pay the same to the Fund by separate bank drafts every month pay the same to the Fund by separate bank drafts or cheques on account of contributions and administrative or cheques on account of contributions and administrative or cheques on account of contributions and administrative charge:] The Master Polishers 4 ITA No. 252/M/2023 [Provided that if the p [Provided that if the payment is made by a cheque, it should be ayment is made by a cheque, it should be drawn only on the local bank of the place in which deposits are drawn only on the local bank of the place in which deposits are drawn only on the local bank of the place in which deposits are made.] Provided further that where there is no branch of the Reserve Provided further that where there is no branch of the Reserve Provided further that where there is no branch of the Reserve Bank or the ' State Bank of India] at the station where the Bank or the ' State Bank of India] at the station where the Bank or the ' State Bank of India] at the station where the *[factory or other est *[factory or other establishment] is situated, the employer shall ablishment] is situated, the employer shall pay to the Fund the amount mentioned above by means of pay to the Fund the amount mentioned above by means of pay to the Fund the amount mentioned above by means of Reserve Bank of India [Government Drafts at parl separately on Reserve Bank of India [Government Drafts at parl separately on Reserve Bank of India [Government Drafts at parl separately on account of contributions and administrative charge. account of contributions and administrative charge. account of contributions and administrative charge. 2) The employer shall forward to the Commi 2) The employer shall forward to the Commissioner, within ssioner, within twenty-five days of close of the month, a monthly abstract in five days of close of the month, a monthly abstract in five days of close of the month, a monthly abstract in such form as the Commissioner may specify showing the such form as the Commissioner may specify showing the such form as the Commissioner may specify showing the aggregate amount of recoveries made from the wages of all the aggregate amount of recoveries made from the wages of all the aggregate amount of recoveries made from the wages of all the members and the aggregate amount contributed by the employer members and the aggregate amount contributed by the employer members and the aggregate amount contributed by the employer in respect of all such members for the month : n respect of all such members for the month : Provided that an employer shall send a Nil return, if no such Provided that an employer shall send a Nil return, if no such Provided that an employer shall send a Nil return, if no such recoveries have been made from the employees: recoveries have been made from the employees: Provided further that in the case of any such employee who has Provided further that in the case of any such employee who has Provided further that in the case of any such employee who has become a member of the Pension Fund und become a member of the Pension Fund under the Employees' er the Employees' Pension Scheme, 1995, the aforesaid Form shall also contain Pension Scheme, 1995, the aforesaid Form shall also contain Pension Scheme, 1995, the aforesaid Form shall also contain such particulars as are necessary to comply with the such particulars as are necessary to comply with the such particulars as are necessary to comply with the requirements of that Scheme. requirements of that Scheme. (3) The employer shall send to the Commissioner within one (3) The employer shall send to the Commissioner within one (3) The employer shall send to the Commissioner within one month of the close of the period of c month of the close of the period of currency, a consolidated urrency, a consolidated Annual Contribution Statement in Form 6 Annual Contribution Statement in Form 6-A, showing the total A, showing the total amount of recoveries made during the period of currency from amount of recoveries made during the period of currency from amount of recoveries made during the period of currency from the wages of each member and the total amount contributed by the wages of each member and the total amount contributed by the wages of each member and the total amount contributed by the employer in respect of each such member for t the employer in respect of each such member for t the employer in respect of each such member for the said period. The employer shall maintain on his record duplicate copies of the The employer shall maintain on his record duplicate copies of the The employer shall maintain on his record duplicate copies of the aforesaid monthly abstract and consolidated annual contribution aforesaid monthly abstract and consolidated annual contribution aforesaid monthly abstract and consolidated annual contribution statement for production at the time of inspection by the statement for production at the time of inspection by the statement for production at the time of inspection by the Inspector.” 3.1 The Ld. Counsel referred to the abov The Ld. Counsel referred to the above clause and submitted e clause and submitted that the employer is required to deposit the PF/ESI contribution of that the employer is required to deposit the PF/ESI contribution of that the employer is required to deposit the PF/ESI contribution of the assessee within 15 days of the close of every month. According the assessee within 15 days of the close of every month. According the assessee within 15 days of the close of every month. According to the Ld. Counsel, term to the Ld. Counsel, term ‘every month’ is the month of payment of is the month of payment of The Master Polishers 5 the salary/remuneration to the e the salary/remuneration to the employee and not the month for and not the month for which salary or wages were due to the employee. He accordingly which salary or wages were due to the employee. He accordingly which salary or wages were due to the employee. He accordingly submitted that if the term submitted that if the term ‘month’ is taken as the month of is taken as the month of payment of the wages/salary to the employe payment of the wages/salary to the employee, then all the payment then all the payment of employee’s contribution are within s contribution are within the due date. The Ld. Counsel the due date. The Ld. Counsel has provided a list of the monthly payment for provident fund and has provided a list of the monthly payment for provident fund and has provided a list of the monthly payment for provident fund and ESI, which is reproduced as under: which is reproduced as under:
The Master Polishers 6 ITA No. 252/M/2023
On the contrary, the Ld. Departmental Representative (DR) contrary, the Ld. Departmental Representative (DR) contrary, the Ld. Departmental Representative (DR) submitted that the term submitted that the term ‘every month’ mentioned in section 38 of mentioned in section 38 of the employees contribution scheme 1952 should be interpreted as the employees contribution scheme 1952 should be interpreted as the employees contribution scheme 1952 should be interpreted as month for which salary/remuneration is due to the employee. He month for which salary/remuneration is due to the employe month for which salary/remuneration is due to the employe submitted that for clarification on the issue submitted that for clarification on the issue-in-dispute of term dispute of term ‘month’, matter may be restored to matter may be restored to the file of the Assessing Officer the file of the Assessing Officer and he may be directed to verify the term and he may be directed to verify the term ‘month month’ from the respective provident fund or ESI authorities. respective provident fund or ESI authorities.
We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. The issue-in- dispute and perused the relevant material on record dispute and perused the relevant material on record dispute is in respect of employee dispute is in respect of employee’scontribution to provident fund to provident fund (PF) and employee state insurance corporation employee state insurance corporation employee state insurance corporation (ESIC) fund amounting to Rs.84,43,087/ amounting to Rs.84,43,087/- and Rs.8,58,774/- respectively. The respectively. The provisions of the Act provisions of the Act provide for payment of the em for payment of the employee’s contribution of PF/ESI of PF/ESI on or before the due date prescribed under on or before the due date prescribed under the relevant PF/ESI and the issue the relevant PF/ESI and the issue-in-dispute is in respect of due dispute is in respect of due date prescribed. According to the assessee, the due has to be date prescribed. According to the assessee, the due has to be date prescribed. According to the assessee, the due has to be reckoned within 15 days from the close of the month in which reckoned within 15 days from the close of the month reckoned within 15 days from the close of the month payment is made to the employe payment is made to the employee, whereas according to Revenue whereas according to Revenue the contribution has to be deposited within the 15 days from the the contribution has to be deposited within the 15 days from the the contribution has to be deposited within the 15 days from the close of the month for which salary/wages of the employee is due. close of the month for which salary/wages of the employee is due. close of the month for which salary/wages of the employee is due. The Ld. Counsel has referred to the decisions of the Hon’ble The Ld. Counsel has referred to the decisions of the Ho The Ld. Counsel has referred to the decisions of the Ho Calcutta Tribunal in the case of Kanoi Paper & Industries Ltd. v. Calcutta Tribunal in the case of Kanoi Paper & Industries Ltd. v. Calcutta Tribunal in the case of Kanoi Paper & Industries Ltd. v. ACIT ITA No. 1260/Cal/1996. The relevant finding of the Tribunal ACIT ITA No. 1260/Cal/1996. The relevant finding of the Tribunal ACIT ITA No. 1260/Cal/1996. The relevant finding of the Tribunal is reproduced as under : is reproduced as under :
The Master Polishers 7 ITA No. 252/M/2023 “6. Clause 38 of the Employees' Provident Fund Scheme, 1952, 6. Clause 38 of the Employees' Provident Fund Scheme, 1952, 6. Clause 38 of the Employees' Provident Fund Scheme, 1952, fixes the time limit for making p fixes the time limit for making payment in respect of ayment in respect of contribution to the provident fund to be 15 days from the close contribution to the provident fund to be 15 days from the close contribution to the provident fund to be 15 days from the close of the month concerned. However, the issue here is whether the of the month concerned. However, the issue here is whether the of the month concerned. However, the issue here is whether the "month" should be considered to be the month to which the "month" should be considered to be the month to which the "month" should be considered to be the month to which the wages relates or the month in which the actual dis wages relates or the month in which the actual dis wages relates or the month in which the actual disbursement of the wages is made, we are of the considered opinion that the the wages is made, we are of the considered opinion that the the wages is made, we are of the considered opinion that the expression "month" should mean here the month during which expression "month" should mean here the month during which expression "month" should mean here the month during which the wages/salary is actually disbursed irrespective of month to the wages/salary is actually disbursed irrespective of month to the wages/salary is actually disbursed irrespective of month to which the same relates. Thus, the scheme of the government which the same relates. Thus, the scheme of the government which the same relates. Thus, the scheme of the government in this regard is that once a deduction is made in respect of the this regard is that once a deduction is made in respect of the this regard is that once a deduction is made in respect of the employees' contribution to the provident fund from the employees' contribution to the provident fund from the employees' contribution to the provident fund from the salary/wages of the employee or the employer also makes his salary/wages of the employee or the employer also makes his salary/wages of the employee or the employer also makes his contribution, factually at the time of disbursement of the salary contribution, factually at the time of disbursement of the salary contribution, factually at the time of disbursement of the salary the payment in respect of such contribution should be made nt in respect of such contribution should be made nt in respect of such contribution should be made forthwith. If for some reason or other the payment of salary for forthwith. If for some reason or other the payment of salary for forthwith. If for some reason or other the payment of salary for a particular month be held up for considerable period of time it a particular month be held up for considerable period of time it a particular month be held up for considerable period of time it cannot be said that the employer would be liable to make cannot be said that the employer would be liable to make cannot be said that the employer would be liable to make payments in respect payments in respect of the "employer's" as well as "employees" of the "employer's" as well as "employees" contribution in respect of wages for such period within a period contribution in respect of wages for such period within a period contribution in respect of wages for such period within a period of 15 days from the close of the month to which the wages of 15 days from the close of the month to which the wages of 15 days from the close of the month to which the wages relates. On the other hand, in our view, most appropriate relates. On the other hand, in our view, most appropriate relates. On the other hand, in our view, most appropriate interpretation would be that th interpretation would be that the employer would be at liberty to e employer would be at liberty to make payment of the contribution concerned within 15 days make payment of the contribution concerned within 15 days make payment of the contribution concerned within 15 days (subject however to the further grace period) from the end of the (subject however to the further grace period) from the end of the (subject however to the further grace period) from the end of the month during which the disbursement of the salary is actually month during which the disbursement of the salary is actually month during which the disbursement of the salary is actually made and the contribution of the, pr made and the contribution of the, provident fund are, thus, ovident fund are, thus, generated, inasmuch as, generated, inasmuch as, the provision relating to the generated, inasmuch as, the provision relating to the the provision relating to the disallowance of such contribution on account of delay is rather disallowance of such contribution on account of delay is rather disallowance of such contribution on account of delay is rather an artificial provision. In our view, a liberal approach has got to an artificial provision. In our view, a liberal approach has got to an artificial provision. In our view, a liberal approach has got to be made to this issue. Ultimately, therefore, be made to this issue. Ultimately, therefore, we reverse the we reverse the order of the lower authorities and direct the assessing officer to order of the lower authorities and direct the assessing officer to order of the lower authorities and direct the assessing officer to examine whether the payments of contribution in the present examine whether the payments of contribution in the present examine whether the payments of contribution in the present case were made within 15 days (allowed with further grace case were made within 15 days (allowed with further grace case were made within 15 days (allowed with further grace period of 5 days) from the close of the respective month period of 5 days) from the close of the respective month period of 5 days) from the close of the respective months during which the disbursement of the salary/wages were actually which the disbursement of the salary/wages were actually which the disbursement of the salary/wages were actually made. The assessing officer should recompute the amount made. The assessing officer should recompute the amount made. The assessing officer should recompute the amount disallowable, if any, on the above basis and take appropriate disallowable, if any, on the above basis and take appropriate disallowable, if any, on the above basis and take appropriate action accordingly. action accordingly.” 5.1 In our opinion, it will be appropriate if the t In our opinion, it will be appropriate if the term erm ‘every month’ specified in Provident Fund scheme, whether specified in Provident Fund scheme, whether it is the month for it is the month for The Master Polishers 8 which salary/wages are are due or month of the payment is payment is referred to Relevant Authoritiesfor finding out Relevant Authoritiesfor finding out with reference to any judicial with reference to any judicial precedent in respect of provisions of the precedent in respect of provisions of the relevant Act relevant Act. Accordingly. we restored this issue back to the file of the Ld. Assessing Officer restored this issue back to the file of the Ld. Assessing Officer restored this issue back to the file of the Ld. Assessing Officer with the direction to find out from the relevant PF authorities about with the direction to find out from the relevant PF authorities about with the direction to find out from the relevant PF authorities about the term ‘every month every month’ as mentioned in clause 38 of the employees as mentioned in clause 38 of the employees provident fund scheme. provident fund scheme. Similarly, he may find out from the ESI Similarly, he may find out from the ESI Authorities. It is needless to mention that the assessee shall be It is needless to mention that the assessee shall be It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds of afforded adequate opportunity of being heard. The ground afforded adequate opportunity of being heard. The ground appeal of the assessee appeal of the assessee are accordingly allowed for statistical accordingly allowed for statistical purposes.